Accumulate Jyoti Structures; target of Rs 65: PLilladher

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Accumulate Jyoti Structures; target of Rs 65: PLilladher

Prabhudas Lilladher is bullish on Jyoti Structures and has recommended accumulate rating on the stock with a target of Rs 65 in its October 25, 2011 research report.

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Prabhudas Lilladher is bullish on Jyoti Structures and has recommended accumulate rating on the stock with a target of Rs 65 in its October 25, 2011 research report.

"Jyoti Structures reported sales growth of 16.5% YoY to Rs6.3bn for Q2FY12, slightly ahead of our estimate of Rs6bn. EBITDA margin was down 80bps YoY to 10.8% (our estimate of 11%), mainly on account of 37% YoY increase in other expense. 50% increase in interest cost due to increased cost of borrowing and higher debt, resulted in PAT de-growth of 11.5% to Rs221m lower than our estimate of Rs251m."

"The current order book stood at Rs43.7bn, up 2.3% YoY. The breakup of order book in terms of segment is: 60% Transmission line, 22% Substation and 18% Rural electrification orders. In terms of client, Power Grid contributed 35% of the order book, Maharashtra SEB 18%, MP SEB 9%, private 11% and 27% other SEBs. The company received fresh orders worth Rs5.5bn in Q2FY12 (down 20% YoY). All the orders during the quarter were received from Power Grid. It highlighted that the outlook for order continues to be bright, with bids for tenders worth Rs50bn likely to be called and bid for tenders worth Rs15bn likely to be opened in the next two months. It highlighted that there are business opportunities worth Rs140bn on the anvil, including few BOT projects. It also highlighted that competitive intensity continues to be high and pressure on margin continues to persist."

"The stock is trading at 4.5x FY12E earnings. We believe that a pick-up in ordering activity and effective management of working capital will be the key to outperformance. We maintain 'Accumulate' rating on the stock, says Prabhudas Lilladher research report.

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